A question that now several people have asked me is why did Sebastián Piñera choose to recognize the Palestinian state? I think there are both domestic and international reasons, with the former being the most important. There is political upside for Piñera in both respects with virtually no cost.
The domestic side is the large Palestinian population (always portrayed as the largest outside the Middle East). Along those lines, here is an excerpt from an article in the UAE press of all places:
Representatives of the estimated 300,000 Chileans of Palestinian descent, including four senators and a number of deputies, are cautiously optimistic that years of lobbying within the Andean nation will bear fruit in 2011.
In November at a speech at the Palestinian Club of Chile, Mr Pinera said he supported an independent Palestinian state and added that he planned to visit soon, but was careful not to mention the borders.
This week Mr Pinera met the Palestinian Authority's president, Mahmoud Abbas, when both leaders attended the inauguration of Dilma Rousseff, Brazil's first female president. Mr Abbas took the opportunity to thank leaders from the region for recognising a Palestinian state with Brazil being the first country in the region to build a Palestinian Embassy.
"We have been doing a lot of meetings and a lot of work and a lot of declarations and we also have put some pressure on the foreign affairs minister and also on the president to recognise the Palestinian state with borders," said Mauricio Abu Ghosh, the president of the Palestinian Federation in Chile. "For us, that is the only way. Without borders, it is better to do nothing."
So the Chilean-Palestinian population has a political presence, and has been lobbying for some time. Piñera can get a political boost--even if not huge--essentially for free (at a time when his approval ratings have dipped to 47 percent). As far as I have seen, there is no domestic cost associated with it, i.e. a large of group of Chileans who will oppose him because of this move.
The international side also has benefits. Unlike Brazil, Chile has not been trying to be a global political player (it has been focused almost entirely on trade) so I don't see international diplomatic projection as a reason. I also do not believe that tweaking the nose of the United States is a reason (as it might be for, say, Bolivia). Piñera feels friendly toward the U.S. But he can show himself in solidarity with the rest of Latin America, and since he is a firm U.S. ally, the Obama administration will not look badly on him for doing so.
I do not know what Piñera's personal views are regarding the Israeli-Palestinian conflict, or whether he has made public pronouncements prior to the past few months. Regardless, there are non-trivial domestic and international benefits to be had, for free.